Weighing the Pros and Cons of Travel Insurance

Weighing the Pros and Cons of Travel Insurance

by Rob Olson, CPCU

The summer season is now upon us, which means vacation plans for millions of Americans are taking shape. One loss exposure many people fail to consider concerns vacation-related losses. Travel insurance can be purchased to cover this potentially large exposure.

Travel insurance is a specific type of insurance that is available to a person who will travel in the near future. It is designed to protect an insured from a wide variety of travel-related losses, including trip cancellation or interruption; emergency medical events; emergency evacuation; lost or delayed baggage, personal effects, passports, and visas; and legal expenses.

It is important to look at the pros and cons of travel insurance and the scenarios in which it may be a wise purchase. On the positive side, travel insurance is probably a wise idea for the person who engages in adventure travel. For example, say that you are hiking in the Andes and are seriously injured in a fall. You need to be airlifted off the mountain, with a cost of $50,000. Travel insurance would be invaluable in this scenario.

Indeed, even non-adventure travelers to foreign countries should seriously consider travel insurance that provides medical care. Prior to this decision, however, you should check with your current health insurer to see if it provides coverage in the country you are visiting. If your existing policy does not provide coverage, travel insurance is probably a wise choice.

If your health is a bit on the precarious side, travel insurance may be a good idea, particularly for complex trips involving numerous flights and connections. If your medical problems necessitate a cancellation or delay in the trip, your travel insurance will typically pay your associated costs. Be aware, however, that any health conditions you have may need to be disclosed up front to the insurer.

Another situation where travel insurance may be advisable is the planning of a destination wedding, in which a huge chunk of the expenses are nonrefundable, such as airline passes for family and friends and venue reservations. If an event interferes with the wedding, the nonrefundable expenses could be large and daunting.

On the flip side, travel insurance can be expensive. The cost may be anywhere from $200 to $400 to insure a $6,000 domestic trip. In this case, you are purchasing travel insurance for financial annoyance. Travel insurance should be purchased for financial disaster, such as the airlifting example above, and not for financial annoyance.

Travel insurance often contains a host of exclusions. Thus, consumers should read the policy carefully to see what is and is not covered. For example, some travel insurance policies may not cover medical evacuation or may have severe restrictions on this coverage.

Lastly, it is important that you deal with a reputable travel agent when deciding to procure this coverage. This travel agent will properly vet the travel insurance company, verifying that it is financially stable and has been in business for many years. There have been cases of financially insolvent travel insurers denying claims right and left due to financial difficulties.

Reproduced with permission of the publisher, International Risk Management Institute, Inc., Dallas, Texas, from the free newsletter IRMI Personal Lines Pilot, copyright International Risk Management Institute, Inc. Further reproduction prohibited. To learn more or subscribe, visithttp://www.IRMI.com/free-newsletters.